2024 Mid-Year Tax Planning Checklist for Business Owners

Now that we have passed the mid-year point, it’s a perfect time for business owners to review their personal transactions and privately held business activities. This checklist lays out 11 key strategies to optimize your tax planning for this year and into 2025.

1. Businesses can claim a 60% federal bonus depreciation expense for 2024 on certain fixed assets such as personal properties (e.g., computers or equipment), land improvements and interior, non-structural parts of a building known as qualified improvement property (QIP). Since the claimable percentage of federal bonus depreciation drops to 40% in 2025, you may want to consider purchasing and placing the fixed assets in service well in advance of the 2024 year-end.
2. The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022 was signed into law in December 2022. The Act favorably changed the deadline for employers to adopt qualified retirement plans for their employees, extending it to 2025. Employers now have until the business’s income tax return deadline, including filing extensions, to adopt a plan and treat it as adopted on December 31 of the prior year. There may still be time to adopt a qualified retirement plan for 2024 in addition to exploring plan enhancement options for 2025.
3. Review the 20% qualified business income (QBI) deduction calculation and components for non-C corporation taxpayers for eligibility and maximization.
4. For tax years starting January 1, 2022, taxpayers must capitalize U.S.-based research and experimental (R&E) expenditures and amortize over five years for research and development (R&D) expenses, or over 15 years for non-U.S. based R&D costs. Taxpayers are no longer allowed to expense immediately. You should revisit your 2024 income projections and net operating loss usage to plan your tax payments accordingly. The R&D credit is still available after the amortization of R&E expenditures. For an in-depth review of the rules, see our article on R&D expenses.
5. If you have multistate or multinational business activities, review your state nexus activities and/or transfer pricing documents.
6. Evaluate your current protection under the Federal Deposit Insurance Corporation (FDIC). Taxpayers and business owners should make sure their bank and deposits are fully protected in case a depository institution fails. Consider talking to your bank or credit union about how you can expand your coverage, if needed, by adding co-signers or additional depositors. Each depositor is generally insured up to $250,000 per FDIC-insured bank, per ownership category.
7. Review your current level of charitable contributions. If you expect your income to change, evaluate the deductibility and tax rates for 2023 versus 2024. Consider setting up a donor-advised fund in which a deduction may be claimed in 2023, but the actual selection and contribution to charities may be deferred until 2024.
8. Review the applicability of the pass-through entity (PTE) tax to work around the Tax Cuts and Jobs Act’s $10,000 state and local tax deduction limitation. As of May 2024, 36 states and one locality (New York City) have adopted the PTE tax, and two states (Pennsylvania and Vermont) have proposed PTE tax bills that are pending legislation.
9. If you are over the age of 70.5 and not able to take advantage of itemized deductions, consider making qualified charitable distributions (QCDs) from your traditional IRA. You can exclude from gross income up to $100,000 ($200,000 for married couples who are both at least 70.5) of these QCDs. In addition, QCDs count toward the IRA owner’s required minimum distribution.
10. Review your estate plan. The lifetime estate and gift tax exemption of $13.61M per individual ($27.22M per couple) sunsets on December 31, 2025, and will be reduced to $5M ($10M per couple) indexed for inflation (about $7M per individual, $14M per couple) in 2026. With the exemption potentially being cut in half, consider gifting real estate, stock (private or public), closely held businesses or partnership interest to take advantage of the higher exemption. The annual gift exclusion per donee in 2024 is $18,000. (Armanino has Qualified Appraisers for estate and gift tax purposes and can perform business and asset valuations.)
11. 2024 is the first year that tax-free rollovers from 529 plans to Roth IRAs are permitted. The Secure 2.0 Act permits beneficiaries of 529 college savings plans to make up to $35,000 of direct trustee-to-trustee rollovers from a 529 plan to their Roth IRA without tax or penalty. Rollovers are subject to Roth IRA annual contribution limits but are not limited based on the taxpayer’s income. The account must have been open for more than 15 years and the amount is limited to the contributions made more than 5 years earlier.

Are You Missing Tax Planning Opportunities?

Year-end will be here before we know it, so now is the time to start your tax planning. Reach out to our privately held business tax experts to discover fresh ways to optimize your tax strategy.